Bulgarian national news agency BTA reported economist calls for the caretaker government to maintain the stability and review what has been done so far by pointing out the problems which the next government will face. Taking out a loan will not solve this country's problems and might even make them worse, the economists said.

The caretaker cabinet has a very modest mandate, given the time frame, and a very modest potential, considering it will work without a parliament, Prof. Boyan Durankev PhD from University of National and World Economy told BTA. According to him, this means that the caretaker government will be largely a continuation of the previous government. People should have modest expectations from this government, Durankev warned. The first and most important things which the government should do is to conduct maybe the first fair elections in Bulgaria's most recent history, to mobilize and create a working administration, especially pertaining to the fiscal system, to conduct an audit of GERB's cabinet and present a report to the people, since there is no parliament, about the pluses and minuses of what previous government has or has not done, said Durankev.

According to him, now is the time to outline the priorities which will be left for the next government.

Durankev is adamant that the State should not take out a loan. First, it became clear that domestic loans under GERB's government did not achieve neither economic growth, nor higher employment and consumption. Second, if the government requests an emergency loan now, it will be at a very high price and will have to be paid off in the next ten years at an excruciating interest rate, the economist said. If the government requests a significant loan for one billion leva, it would mean that the previous government had declared bankruptcy and the Exchequer is empty. This would not be good at all, especially for GERB's government, and may influence the election results, the professor commented. This is why, according to him, the caretaker government will not take such action.

The economist noted that Bulgaria is a champion in the EU for corruption, and even if this country takes out a loan, there is no guarantee that the money will reach the small- and medium-sized enterprises, and not be channeled towards certain structures and groups. Although Bulgaria has a stable financial macro-framework, it may plunge into a fiscal crisis if a financial relaxation is permitted now.

The government may accomplish a limited number of things, Georgi Angelov, an economist from the Open Society Institute, told BTA. He outlined the most important things for the caretaker government as being to ensure the revenue collection in the Exchequer and the payment of pensions and wages, as well as speed up the absorption of EU funds. There are still four billion euro to be absorbed under the current programming period, and the time for that runs out at the end of this year. If these funds are poured into the economy and into labour market measures, then there is no point of even thinking about a loan, said Angelov.

According to him there are huge labour market problems in Bulgaria, which should be analyzed and it should be determined why 500,000 jobs were lost. Bulgaria is the only case of a country with a stable fiscal system with labour market problems.

A huge problem, especially for employers outside Sofia, are the minimum insurance thresholds, said Angelov. Wages are high in the capital, and these thresholds are bearable, but they constitute a huge percentage of labour costs in many regions across the country with low wages, and are an obstacle to hiring more people, which according to the economist is the reason for the loss of 100,000 jobs after 2010.

It would be good if the caretaker government completely reviews the social, energy and public spending areas, points out the problems and thus provides topics for meaningful debate during the election campaign, said the economist.

The projected deficit for this year is 1.3 - 1.5 per cent of GDP, which is relatively large given the legally permitted maximum of two per cent, said Angelov. In the past four years, excluding the last one, this country had significant budget deficits, which did not help the economy. Taking out a loan is not something which can take us out of the recession, the economist said. The roughly four billion euro remaining until the end of 2013 are not all money for motorways. Over one billion is from the European Social Fund and could be used for labour market measures, said Angelov.

Krassen Stanchev, an economist and Chairman of the Management Board of the Institute for Market Economics, told BTA that the most important thing right now is to maintain the projected budget balance for this year. This means that part of the spendings should be cut, such as administrative costs, while some of the services should be improved, such as the e-government, said Stanchev, adding that these expenses would be lowered if administrative services are offered online. The government spends around 80 million leva each day, and if the expenditures for even just one day are saved, these 80 million leva could be used for other things ranging from welfare to pensions, said he.

The second important thing for this government is for things to calm down, because the lack of political stability leads to lack of discipline, which could in turn lead to citizens and companies to stop paying taxes. However, there are no such indications as of now, said Stanchev.

The third important thing is for the elections to be organized, in which Stanchev does not see a problem. He, however, does not exclude the possibility that a cabinet could not be formed after the elections, which would mean that elections will have to be held once again.

It is stupid and senseless to take out a loan in order to encourage demand, said Stanchev. Directing capital expenditures towards the social sphere, as the trade unions propose, is not a good idea - this would mean that certain investment projects will be stopped and jobs will be lost, Stanchev commented.

Source: bne